IMF expertise in the eurozone crisis: from stimulus talk to austerity policy

Abstract

The eurozone crisis presented the opportunity to reform European economic policies. In spring 2010, a new technocratic knowledge regime developed in the form of the Troika that consisted of the European Commission, the European Central Bank and the International Monetary Fund (IMF). This article provides new, previously understudied, knowledge on the internal dynamics of the Troika. As the prevailing austerity paradigm had been questioned during the preceding years also within the IMF, this study analyses the role of IMF’s expertise during the negotiations that led to the first Greek loan package and created a path-dependent crisis management scheme. It traces how the IMF acted as a source of expertise and its role in the persistence of the austerity paradigm. The analysis is based on a unique set of interviews with decision-makers. The IMF’s role in the negotiations was very important, but unexpectedly the Commission ruled on most of the content. In contrast to some earlier research, this analysis argues that even if the IMF had become more open to new economic-policy ideas, it did not truly challenge the European austerity policy. Reasons for this include the perceived lack of fiscal space, constraints from the EU, pessimism towards Greek growth, and the gap between research and policy departments of the IMF. This partly explains why the crisis did not lead to a change in eurozone policies. The analysis contributes also to identifying intra-institutional autonomy and fragmentation as reasons for the stability of economic paradigms despite apparent challenges even within hegemonic institutions such as the IMF.